Assume that you are economic advisor to the president of Nation X, a small open economy. The nation is having balance of payments deficits for the last 5 years mainly caused by increasing intermediate goods imports of the manufacturing industry and capital outflows from the nation. Table 1: Current State of the Economy (2023) Unemployment Rate 15 % Inflation Rate 25 % Interest Rate 10 % BOP Deficit/GDP 6% What policies would you recommend to solve the current economic problems of this nation? Explain your policy recommendations in detail by giving information also about the possible consequences of these policies.
Assume that you are economic advisor to the president of Nation X, a small open economy. The nation is having balance of payments deficits for the last 5 years mainly caused by increasing intermediate goods imports of the manufacturing industry and capital outflows from the nation. Table 1: Current State of the Economy (2023) Unemployment Rate 15 % Inflation Rate 25 % Interest Rate 10 % BOP Deficit/GDP 6% What policies would you recommend to solve the current economic problems of this nation? Explain your policy recommendations in detail by giving information also about the possible consequences of these policies.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Draw graphs to show the current status of the economy and the effects of the policies.
Transcribed Image Text:Assume that you are economic advisor to the president of
Nation X, a small open economy. The nation is having balance
of payments deficits for the last 5 years mainly caused by
increasing intermediate goods imports of the manufacturing
industry and capital outflows from the nation.
Table 1: Current State of the Economy (2023)
Unemployment Rate 15 %
Inflation Rate
25 %
Interest Rate
10 %
BOP Deficit/GDP 6%
What policies would you recommend to solve the current
economic problems of this nation? Explain your policy
recommendations in detail by giving information also about
the possible consequences of these policies.
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